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Inflation to peak up to 3.8% but fall back to 1.5%

Media release 17 January 2001

Inflation to peak up to 3.8% but fall back to 1.5%

"Given that annual inflation is likely to peak under 3.8% following the dramatic fall in the kiwi dollar, which is now recovering, it is fair to say we have done reasonably well," says Alasdair Thompson, Chief Executive, Employers & Manufacturers Association (Northern).

"With sluggish consumer spending making it difficult to pass on higher costs to consumers, petrol prices retreating and as the NZ Dollar recovers, the annual inflation rate ought to be back below 1.5% later this year.

"Put all that together with US Federal Reserve dropping interest rates and our own export receipts slowly picking up, there is a strong case for Reserve Bank NZ Governor, Don Brash, to ease back our interest rates too when he undertakes the OCR review next Wednesday.

"In the past, Dr Brash has cautiously followed the formerly rigid direction to control inflation. His contract is not now so rigid. He can look through one off external factors beyond his, or indeed New Zealand's, control."

"The Employers & Manufacturers Association believes the scene is set for interest rates to be eased," said Mr Thompson.

Further comments: Alasdair Thompson Phone: Business 09 367 0911 Home 09 303 3951 Mobile 025 982 024

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